Infrastructure improvements at Colombo Port in Sri Lanka will offer “huge advantages” over competitors in the battle for transhipment business in south Asia, according to the Asian Development Bank (ADB).
Physical improvements combined with strategic marketing will give lines an incentive to set up transhipment hubs and attract increased investment over time, the bank noted in a report assessing the effectiveness and sustainability of infrastructure works projects at the port.
“Compared with its competitors, the improved efficiency and capacity to handle large vessels will be huge advantages to Colombo Port given its relative proximity to India’s southern and east coast markets,” it said.
“Most ports in the Indian subcontinent face congestion, and Colombo Port, with its added capacity, can continue to offer competitive shipping options and significantly benefit the regional trade.”
The ADB provided a loan of USD300 million to part-fund the public-sector component of recently completed harbour infrastructure work. This was to accommodate three new terminals at the Port, with each new terminal to provide additional capacity of 2.4 million teu.
Previously the maximum capacity of vessels able to enter Colombo Port was 8,000 teu with a maximum draught of 14.2 m. After the improvements, at the end of September, the port welcomed Marco Polo, a 396 m-long Explorer class CMA CGM vessel with a capacity of 16,000 teu.
“The new facilities make it the only port in the south Asia region with a deepwater terminal that can accommodate the newest breed of 18,000 teu container ships,” the report notes. “Higher efficiency and faster delivery times will attract larger vessels and higher volumes of trade.
“This enhances Sri Lanka’s competitiveness in international trade and it should draw investment to the country that will improve manufacturing and distribution centres and benefit the Sri Lankan economy both directly and through the multiplier effect of increased operation at the port.”
The ADB’s mission is to reduce poverty in Asian countries through loans, grants, policy dialogue, technical assistance, and equity investments.
The Sri Lankan government forecasts growth in cargo traffic will enable the transport sector, including ports, to contribute 40% of total GDP by 2020. That is four times more than the present contribution.
Transhipment traffic grew from 2.785 million teu in 2008 to 3.699 million teu 2014. About 70% of containers handled at Colombo Port are for transhipment. Of these, 75% are for the Indian subcontinent and 25% for west Africa.
The first of four berths at Colombo International Container Terminal opened in April last year in a joint venture between China Merchants Holdings International (CMHI) and the Sri Lankan Ports Authority. CMHI holds an 85% share in the venture, in what is believed to be the largest single foreign investment in the country.
The Sri Lankan government is seeking investors to take a 49% stake in development of the East Container Terminal.
Meanwhile, a project with Chinese investment to develop a USD1.4 billion ‘port city’ on more than 100 ha of land at Colombo Port remains suspended pending a government review of the awarding process and negotiation with the investors.
The project – to build apartments, malls, hotels, marinas, and other entertainment and commercial facilities – was suspended in March on the basis that it did not have proper permits and approvals. It had previously been approved by China-friendly former president Mahinda Rajapaska.